The Fracturing of the American Corporate Elite

by Mark S. Mizruchi

In the aftermath of a financial crisis marked by bank-friendly bailouts and loosening campaign finance restrictions, a chorus of critics warns that business leaders have too much influence over American politics. Mark Mizruchi worries about the ways they exert too little. The Fracturing of the American Corporate Elite advances the surprising argument that American CEOs, seemingly more powerful today than ever, have abrogated the key leadership role they once played in addressing national challenges, with grave consequences for American society.

Following World War II, American business leaders observed an ethic of civic responsibility and enlightened self-interest. Steering a course of moderation and pragmatism, they accepted the legitimacy of organized labor and federal regulation of the economy and offered support, sometimes actively, as Congress passed legislation to build the interstate highway system, reduce discrimination in hiring, and provide a safety net for the elderly and needy. In the 1970s, however, faced with inflation, foreign competition, and growing public criticism, corporate leaders became increasingly confrontational with labor and government. As they succeeded in taming their opponents, business leaders paradoxically undermined their ability to act collectively. The acquisition wave of the 1980s created further pressures to focus on shareholder value and short-term gain rather than long-term problems facing their country.

Today’s corporate elite is a fragmented, ineffectual group that is unwilling to tackle the big issues, despite unprecedented wealth and political clout. Mizruchi’s sobering assessment of the dissolution of America’s business class helps explain the polarization and gridlock that stifle U.S. politics.

Genres: Sociology, Politics, Economics, Political Science, Business

384 pages, Hardcover

First published May 7, 2013

Reviews

[Blyden · Rating 4 out of 5]

“What would be worse than a powerful, well-organized corporate elite exercising their power to shape the policies of our nation?” As a sociologist with a progressive, left libertarian orientation, my short answer to this question has typically been “not much”, but my friend and colleague Mark Mizruchi offers a surprising answer in his latest book The Fracturing of the American Corporate Elite, which I read late last summer. What might be worse, he suggests, is a having a corporate elite who do not exercise their power to shape policies, either because they no longer have much civic interest or because they fractured and disunited. This answer has a touch of irony given that much of Mizruchi’s work, including The American Corporate Network 1904-1974 (1982), details how director interlocks and other ties connect and coordinate a corporate elite, but politics have certainly changed since the ‘70s, and apparently so have the political networks of the corporate elite. The historical narrative from which Mizruchi’s answer is drawn is a kind of cautionary, “be careful what you wish for” warning to progressives who see corporations and the “1%ers” as corrupting, and even killing, democracy.

Mizruchi begins by offering historically evidence that the mid-century corporate elite were both more unified and more civic-minded, attributing this to (1) pragmatism about the role of the state in regulating the economy, (2) their relationship to labor, and (3) a mediating role played by banks. He then documents the transition from the 1980s onward of the elite becoming divided, with a large portion of them becoming more political conservative, less civic-minded, and more focused on their firm’s bottom line and their own personal wealth. He marks a growing separation between the interests of government and the interests of corporations, and a corresponding corporate “revolt” against regulation and taxation, intertwined with the revolt of corporate owners against the managerial capitalism of earlier decades and the ‘80s wave of corporate takeovers fueled by junk bond capital which pressed corporate leaders to be attentive to company value. The relationship between the elites and labor unions had been a major factor unifying the elite, but dissipated as the power of organized labor declined and the corporate elite more or less won the labor war. Moreover, banks experienced declining centrality in the corporate network: the “money center could no longer hold” (p.191, 197). Their moderating and unifying influence greatly reduced, the network fragmented. In later chapters Mizruchi explores the political consequences of the fractured corporate elite, mainly with regard to taxes and health care legislation, and ponders what the change may mean for the future of our nation, returns in the book’s final pages to the idea that “To the extent that an elite exists… the society will benefit [if] the elite exercises moderation and responsibility.” (p.17, p.285-286).

This book does not feature a core quantitative analyses of the kind often found in Mizruchi’s works. The overall analysis of the book is historical, with a fairly heavy use of quotes. Some of these come from political correspondence, some from proceedings of business groups, some from Congressional hearing testimony, and some from other sources. The Chapters that are most typical to Mizruchi’s usual mode of scholarship are Chapters Two, which may be considered a review of several of Mizruchi’s past works, and Five, which features quantitative analyses and also draws content from other Mizruchi work. Chapter Five seemed to me the strongest and most tightly-written of the chapters.

Mizruchi’s arguments about how the relations between business and government, business and labor, and business and banks changed and how that led to a conservative shift and a fractured elite are solid. But just how fractured is the elite? Any significant disunity is sufficient to break cohesive corporate power – this is Mizruchi’s point – but there is a great difference between an elite fractured into several blocs versus one disintegrated into splinters. Mizruchi has documented a “fracturing”, not a disintegration. Corporate power may no longer be cohesive, but let no one doubt that each of its various blocs remains quite strong.

The part of the book I am least satisfied with is the exploration of the political consequences focused on tax policies and health care legislation. The dependent variable for each is virtually binary: support or opposition. With tax rates this approach seems reasonable because, differences between types of taxes notwithstanding, I can imagine the issue fitting one dimension, of greater or lesser taxes, relatively well. That assumption falls apart with the multiplex healthcare issue, in my opinion. As Obamacare shows, there can be many different dimensions to the healthcare issue. Looking simply at support versus opposition is likely to obscure a lot of meaningful variation in why people support or oppose. Two people might agree on the binary indicator without agreeing on anything else! Also, can each of these be considered a unit issue across time? Treating taxes as one issue across the years seems reasonable, but treating healthcare as a single issue over time is a different story, in my opinion. Mizruchi explores how the various plans and their contexts varied, but this does not entirely offset the idea that one is not comparing apples to apples when looking at support for a New Deal health care plan, Watergate-era health plan, Clinton plan, and Obamacare. Can we be sure that the success in adopting Obamacare is a result of disunity among corporate leaders, as opposed to differences in the plans? As a progressive or left libertarian, I question the validity of the assumptions that (1) greater tax revenue is a reasonable indicator of greater civic-mindedness and (2) any government health plan is necessarily a good thing. These seem to me to be assumptions of classic liberalism, characteristic of an earlier political era in which that philosophy dominated. Without doubt there has been a sea change in political views, and not just among the corporate elite, but that change may be more about redefining rather than deserting civic values. Do these two issues suffice to demonstrate a decline in civic-mindedness and illustrate the political ramifications of this shift combined with a fracturing of the corporate elite? They are not bad issues to choose and Mizruchi’s narrative fits them, but what others might we test it against?

This book is a good read. The core idea is a thought-provoking one. The history and various quotes from business leaders provide some interesting insight into how the elite think. The claim that a fractured, self-interested elite could be worse than a unified but somewhat civic-minded one seems quite plausible, but I am still considering just how fractured and how civic-minded the corporate elite have been in each time period. If there must be an elite, the more civic-minded the better, I suppose, but can it only be civic-minded if it is unified? Is the gain in fracturing really offset by the loss in civic-mindedness? Could we have a fractured, yet still civic-minded elite? Must there be an elite? You should read the book and decide for yourself.

[Kelly · Rating 2 out of 5]

This very well-researched book depicts an interesting history of business leaders' role in society from the 1920s onward and how it's evolved over time. It is worthy of publication in summary form, as the book reads dryly like a long thesis paper in many parts, but its main points are strong and interesting in today's environment. I didn't like its pessimistic tone without suggesting opportunities for positive courses of action.

"The American corporate elite, since the early 1990s, has become fragmented, without an organized group of pragmatic leaders capable of addressing the major issues with which the group has been confronted...the corporate elite has lost its ability to restrain the most insidious elements of American political life, contributing to an extremism in politics that the country has not seen in nearly a century, if not longer...This is an elite that, rather than leading, has retreated into narrow self-interest."